We present Keck II spectroscopy of an optical mHz quasi-periodic oscillations (QPOs) in the lightcurve of the X-ray pulsar binary Her X-1. In the power spectrum it appears as `peaked noise', with a coherency $\sim$2, a central frequency of 35 mHz and a peak-to-peak amplitude of 5%. However, the dynamic power spectrum shows it to be an intermittent QPO, with a lifetime of $\sim$hundred seconds, as expected if the lifetime of the orbiting material is equal to the thermal timescale of the inner disk. We have decomposed the spectral time series into constant and variable components and used blackbody fits to the resulting spectra to characterise the spectrum of the QPO variability and constrain possible production sites. We find that the spectrum of the QPO is best-fit by a small hot region, possibly the inner regions of the accretion disk, where the ballistic accretion stream impacts onto the disk. The lack of any excess power around the QPO frequency in the X-ray power spectrum, created using simultaneous lightcurves from XTE, implies that the QPO is not simply reprocessed X-ray variability.